Anders Meinert Jørgensen has decided to resign from his position as head of group compliance at Danske Bank, which has been embroiled in money laundering investigations involving its Estonian branch in recent months.

Jørgensen's superiors have been aware of his decision to leave for a while and they hope to find his replacement soon. He is not expected to leave until September or October. ​Danske Bank has employed him in his present capacity since September 2014. He told Compliance Matters: "For a while now, I have thought about doing something else – possibly not even in the financial sector – so I have decided to leave my position as head of group compliance and focus on deciding what I want to do in the future. I have been happy working at Danske Bank and being able to contribute to giving compliance a boost across the organisation over the past couple of years."

The compliance head's departure, at least at first sight, appears to be an amicable one. Thomas Borgen, the CEO of Danske Bank, wrote in a press release on the subject: “Anders has contributed extensively to strengthening compliance work across the group. I am sad to see him leave the Danske Bank Group and want to thank him for his efforts, which have helped ensure that Danske Bank’s compliance activities are now at a different level. I wish him all the best in his future career.”

The Danish Financial Services Authority has not announced its intention to impose any fines or charges in relation to the money-laundering allegations, although this may change in future. It recently told the bank to build up its stocks 'of 'regulatory capital' by an extra 5 billion kroner (US$800 million) as a direct consequence of the revelations.

The Magnitsky investigation

Earlier this week Bill Browder, the CEO of an investment fund called Hermitage Capital Management, tabled a criminal complaint in Denmark (addressed to the public prosecutor for special economic crimes and international crime in Copenhagen) against the bank on suspicion of its involvement in Russian money laundering between 2007 and 2015, according to a report in the London Financial Times. Browder believes that the laundrymen used 190 accounts or more at Danske to wash US$203 million of dirty Russian money. He says that they opened 16 accounts at the Estonian branch in the names of shell vehicles, routing the money deposited in these accounts to another five accounts, and then using all 21 accounts (whose turnover, he claims, reached US$9 billion in toto) to move dirty money into the remainder.

Browder used to employ Serge Magnitsky, a Russian tax accountant on a mission to uncover corruption in his home country. The Russian authorities arrested him in 2008 and, it is widely believed, caused his death 11 months later while he was still in police custody. Magnitsky claimed that he had uncovered a fraud against state coffers on the part of high-ranking Russian officials that led to a loss of about US$230 million and Browder believes the crimes that Magnitsky was investigating to be linked to accounts at Danske Bank's Estonian branch. The US passed the Magnitsky Act in 2012, which stopped all Russian officials thought to be involved in Magnitsky’s death from visiting the country or using its banking system. There is, similarly, a "Magnitsky clause" in the UK's recently-passed Sanctions and Anti-Money Laundering Act 2018 which allows HM Government to impose financial sanctions on people it suspects of flouting human rights.

The Estonian FSA and the Danish FSA

Finantsinspektsioon, the Estonian financial supervision and resolution authority, and the Danish FSA are now working together to resolve the crisis. According to banking directives of the the European Union (of which both countries are members) the prudential supervising activity for a cross-border operating bank lies with the regulator of its home country. According to section 48 of the European Union's fourth Money Laundering Directive, AML measures are supervised by the competent authorities of the host country. If the bank operates establishments in another EU country, its home regulator is responsible for ensuring that it applies group-wide AML/ATF policies and procedures. Co-operation between both regulators is expected.

As an example of the division of the supervisory responsibilities, the Danish FSA has recently conducted an investigation of Danske Bank’s management and control related to the branch in Estonia, while Finantsinspektsioon has investigated compliance at the Estonian branch. In Estonia and Denmark, matters of criminal law with regard to money laundering, terrorist financing and related criminal procedure is decided and carried out by policemen and public prosecutors. Finantsinspektsioon and the Danish FSA do not combine their jobs as regulators with those of national financial intelligence units, as do Canada's FINTRAC, Australia's AUSTRAC and Russia's Rosfinmonitoring.

The Danish press is already speculating about the size of fine that Danske Bank is likely to face. Bloomberg quotes five analaysts whose estimates veer wildly between US$315 million and $4.7 billion, with an average estimate of $670 million.

On 3rd May the Danish FSA published its decision concerning Danske Bank's management and control in the Estonian money laundering case. The decision consisted of eight orders and eight reprimands, along with the stipulation that the bank ought to increase its capital requirement because of an increase in "compliance and reputational risk." The decision was based on the regulatory rules concerning management and control, i.e. the jobs that Danske Bank's management in Denmark ought to have done.

It added: "The specific questions concerning the lack of AML measures in the Estonian branch are the responsibility of the Estonian authorities. Our investigation shows that there have been serious deficiencies in the bank's governance. The bank acted too late on information concerning the lack of anti-money laundering measures and on suspicion of criminal activities of customers, which it received from sources that include an internal whistle-blower. The bank's governance has not ensured that the problems in Estonia have been handled in a satisfactory way, including by reporting suspected crime to the relevant authorities. As matters now stand, there is not basis [sic] for initiating legal proceedings against the current management or other employees at the bank, in accordance with the fit & proper rules. No later than 30 June, Danske Bank must document compliance with the orders of the decision."

Estonia's evaluation of its own regulation

In May Kilvar Kessler, the chairman of Finantsinspektsioon's management board, presented his annual report for 2017 to the Riigikogu, Estonia's unicameral parliament. He stated: "Given the size of Estonian financial intermediaries, the nature of the services they provide, and the quality of supervisory dialogue, the management, institutional organisation, and especially internal control in the regulated financial sector in Estonia as a whole deserves the grade C+. There is room for development and Finantsinspektsioon will continue its intensive work on the strategic priority of supervising corporate governance."